How to Go into Business with Family (and Make it Work!)

From bakeries to accounting firms – and everything in between – many businesses around the world are run by families. In fact, according to the U.S. Bureau of the Census, an estimated 90 percent of American businesses are managed by people related to one another. 

Going into business with family can have many positives. The perks include everything from being familiar with one another’s strengths and weaknesses to the ability to trust a relative more easily than an outside stranger. But working with family can also make things more complicated. Conflict can get in the way of daily decisions, business talk may work its way into family outings and rivalries can foster unhealthy work practices. 

There are, however, ways to make it work. And experts note that when done correctly, going into business can be a successful endeavor. Here are 10 tips for running a successful business when working with a relative.

Put everything in writing

Working with family may feel more casual, however, business coach Sai Blackbyrn says it’s important to have more than just a verbal agreement. “Before you even invest a single dollar into the company, make sure you have everything, down to the tiniest detail, written in a formal contract,” he says. “This includes working hours, responsibilities, profit sharing, wages, vacation time, holidays and whatever else you can think of.”

Define everyone’s roles upfront

Develop an organizational chart with job descriptions and clearly defined responsibilities before you launch. “Everyone on the team will feel confident knowing what they are responsible for and trusting that their partner knows and feels the same,” explains Marni Blank a business coach who specializes in helping friends and families successfully go into business together. 

Honor each other’s strengths

Be clear on what each person brings to the table and allow them to lead with that skill. "By taking the time to thoughtfully consider the strengths and weaknesses of each partner, it’s easier to utilize those strengths for the good of the business," Blank said.

For example, if you have a marketing background, take the lead on any promotional and branding aspects of the business. If another family member is an accomplished salesman, trust them to tackle new client generation and customer retention. You can collaborate together on big decisions but ultimately defer to each other’s skills for day-to-day operations. 

Get an outsider’s opinion

Having a third party unrelated to the family members in the business can help you diffuse situations by giving objective feedback, whether it’s a new product idea or business expansion. “Introducing a trusted outside advisor to the regular strategic meetings keeps siblings and parents honest and focused on the business issues,” explains Alicia Goodrow, a corporate attorney who specializes in working with family businesses. 

 An outside advisory group can provide better guidance in the event of a dispute – sometimes just by keeping the discussions focused on the item at hand. Goodrow explains that outside advisors rarely solve problems but they can help the parties hear each other more clearly. They can also help to ensure that family dynamics and emotions stay out of business decisions.

Treat all employees as equals

“You need to be mindful of how you treat other employees so that they do not become resentful to the management for practicing favoritism or bias,” says Blackbyrn. Resentment among your non-family employees toward family employees can breed a toxic work environment. Therefore, it’s important to not just promote someone because they are your son but to focus on rewarding employees who work hard, put in the effort and are qualified for a role.

Have a communication strategy

Sure you might talk to your family members most days of the week but it’s important to implement a formal communication strategy dedicated to business only talk. “Setting aside regular meeting times (perhaps with outside advisors present) with agendas and goals can help founders reset direction, react to changes, and communicate about changing goals and directions,” says Goodrow.

Take a break 

It can often be easier to fall into conflict with a family member versus a coworker who you’re not related to. When things get heated, try tabling the conversation until all parties calm down. The decisions will still be there when you return, however, stepping away can allow you to cool off and see things with a clear head. This will also help you return to the conversation ready to talk strictly business without family dynamics or emotion being a priority within the conversation. 

Don’t be afraid to ask for help

You might want to keep the business “in the family,” but don’t be afraid to bring in outside experts in the event that you need them. Goodrow says this can be especially helpful in these three areas:

  • The business requires a specialized skill set that the family members don’t have

  • The workload exceeds the capacity of the family members time and talent

  • An outsider will open up doors to new opportunities, funding, or products

Stay professional

Working with family has many benefits, so try your best to prevent family history from seeping into your place of business. Make a pact to leave work at work and to drop all business-related conversations whenever you leave your office for the day. 

Interested in learning more? Check out more tips and guides for your business:

Nicole Pajer